WhatsApp cofounder talks about the future under Facebook

WhatsApp co-founder Brian Acton says he’s still a bit “dumbstruck” over selling his startup company to Facebook for a whopping $19 billion. But the sale doesn’t mean WhatsApp will alter the no-frills focus that helped the mobile messaging service build a user base of more than 500 million people around the world, he told an audience of Stanford students and would-be entrepreneurs on Wednesday night.

“Because of the relationship we negotiated, we don’t necessarily look at it from the perspective that we’re going to get swallowed by the Borg,” Acton said. He was referring to the terms that he and cofounder Jan Koum negotiated with Facebook CEO Mark Zuckerberg, who has said WhatsApp will operate as a standalone service owned by Facebook.

Of course, many founders make similar vows after selling their startups to a much larger company. But the 42-year-old Acton, who worked at both Apple and Yahoo before helping launch WhatsApp, said he’s determined to apply the lessons he learned from watching other acquisitions that succeeded or failed.

Acton, who graduated from Stanford 20 years ago, wore a faded blue T-shirt, cargo shorts and sneakers to speak at the event sponsored by StartX, a nonprofit start-up accelerator that helps entrepreneurs who are Stanford students or otherwise affiliated with the university.

Despite its global popularity, WhatsApp is less known in the United States than in other parts of the world, Acton acknowledged. “It’s hard to explain to people in the US, but the product resonated in Europe” because it allows users to send messages cheaply over the Internet, rather than pay exorbitant fees that most European telephone companies charge to send text messages from one country to another.

Acton also attributed WhatsApp’s growth to a focus on simple utility that he once famously summarized, on a piece of paper posted in the start-up’s offices, as “No ads, no games, no gimmicks.” He added that the company has emphasized growth over revenue; for example, WhatsApp foregoes its $1 annual subscription fee in India, where he said the process of collecting payments would be too cumbersome and discouraging to users.

As for the difference between WhatsApp and Facebook Messenger, Acton noted that WhatsApp lets you send messages to people if you have their phone number, while Messenger lets you contact people who are your Facebook friends. The groups are often different, he added, suggesting that you may connect with some people on Facebook even if you don’t know them well enough to exchange phone numbers.

When asked about WhatsApp’s value to Facebook, Acton told reporters after the talk: “I think the goal here is … WhatsApp will bring Facebook that other billion users.”

But he acknowledged “there are longer term questions as to how we generate revenue and value on the bottom line for Facebook.” He offered few details there, except to reiterate that WhatsApp won’t share users’ personal data with Facebook and that he doesn’t expect to see ads on WhatsApp.

“Our revenue models are different. We can build revenue models that are service oriented,” Acton said. When asked what he had in mind, he added, “TBD” – as in, “to be determined” – and said: “It’s an area of exploration and experimentation.”

WhatsApp still only has about 60 employees, Acton said, although the company has reportedly signed leases for two new buildings near its current Mountain View headquarters. But the company has no plans to move to San Francisco, where many other trendy startups are based, Acton said. He noted that Koum grew up in Mountain View, while Acton liked to eat at some of the Asian restaurants that dotted downtown Mountain View when he was in college.

“Mountain View is our home,” he said. “We plan to stay there for some years.” But in a nod to the many young techies who prefer to live in a bigger city, Acton noted that WhatsApp is in a hiring mode, and added that its offices are close to the Caltrain line that extends to San Francisco.

Cash the check Brian! Right away! Valuation based on market anticipation/speculation have again entered the territory of unreasonable risk. Securing revenue potential by overpaying for it (in your case without a revenue model) argurs that a new monstrous bubble is emerging.